Shale Oil Producer Shares Fall: Devon, Diamondback Beat Estimates
Slate producers Devon energy (DVN) and Diamondback energy ( FANG ) beat earnings forecasts Monday, after both companies posted losses during market trading. Shares continued to fall in extended trading hours.
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DVN and FANG are the first of several US shale oil producers to report quarterly results this week, hot on the heels of the energy giants Exxon Mobil (XOM), Chevron (CVX) and Shell (SHEL) all post record profits. Shares in the shale oil producer fell mostly on Monday as crude oil prices also fell sharply.
Shale Oil Producer Stocks: Devon Energy Earnings
Estimates: FactSet analysts forecast that earnings for Devon Energy will soar 285% year over year to $2.31 per share and sales will increase 72% to $4.1 billion in the second quarter.
Results: Devon Energy reported earnings of $2.59 per share, up 331% year over year. Revenue grew 133% to $5.6 billion.
Based on the second quarter results, DVN increased its production guidance for the full year by 3% to a range of 600,000-610,000 oil equivalent barrels per day. Devon Energy also adjusted its upstream capital guidance to between $2.2-2.4 billion, up from $2.1 billion.
“This success was demonstrated by production from our Delaware-focused program that exceeded guidance expectations, our streamlined cost structure captured the full benefit of higher commodity prices and we returned record amounts of cash to shareholders,” CEO Rick Muncrief said in a news release. release.
Production for the second quarter averaged 616,000 oil equivalent barrels per day, an increase of 7% from the first quarter. Upstream capital expenditures were 5% below the company’s expectations, totaling $513 million.
Devon Energy expects capital expenditures in the 3rd quarter to be between $680-$755 million.
DVN shares fell 2% to $61.59 on Monday. Devon Energy has started to work higher after finding support at the 200-day line. DVN stock remains below the 50-day line, according to MarketSmith.
Oklahoma City-based Devon Energy is a leading US onshore oil and gas producer. It operates in several basins across the country, including the resource-rich Delaware Basin in West Texas and the Barnett Shale, one of the largest onshore natural gas fields in the United States
The company ranks third in the industry group Oil & Gas-US Exploration and Production. DVN has a Composite Rating of 99. It has a 98 Relative Strength Rating, an exclusive IBD Stock Checkup measure of stock price movement with a score from 1 to 99. The rating shows how a stock’s performance over the past 52 weeks stacks up against all others the shares in IBD’s database. The share has an EPS rating of 80.
Diamondback Energy Revenues
Estimates: Wall Street estimates Diamondback Energy earnings per share of $6.68, up 179% from the year-ago quarter, and a 48% increase in sales to $2.5 billion.
Earnings: Earnings per share increased 194% to $7.07. Revenue rose 59% to $2.7 billion.
Investments in operational and non-operational drilling in Q2 were $468 million. So far in 2022, Diamondback Energy’s capital expenditures have come to $905 million. The company expects an additional 470-510 million dollars in expenses in the third quarter.
“We continue to focus on operational excellence and cost control in this inflationary operating environment, working to mitigate and offset the persistent inflationary pressures we see across our business. Diamondback has a strong track record of cost control, and we expect to continue to improve us on this record in the coming quarters,” CEO Travis Stice said in a statement.
FANG shares fell 1.7% to 125.83 on Monday. Shares are trying to break above the 200-day mark. The stock is in the midst of a consolidation and currently 16% below the official buy point of 148.09, according to MarketSmith analysis.
Diamondback Energy ranks fifth in the Oil & Gas-US Exploration and Production industry group. FANG has a composite rating of 99. It has a relative strength rating of 94 and an EPS rating of 94.
In Q1, Diamondback reportedly got aggressive and operated 12 rigs in the Permian Basin. However, well completion services, materials and labor are becoming increasingly expensive and difficult to obtain, and much of the drilling has gone to simply keeping output levels stable.
“Everything is tight across the board, whether it’s sand, casing, new high-spec rigs, frack crews — everything is very, very tight,” CFO Kaes Van’t Hof said during the company’s first-quarter earnings call in May. “We are doing our part by keeping our activity level flat.”
Rising oil prices have made keeping production stable a winning strategy. Analysts forecast Diamondback’s full-year 2022 earnings to rise 126% to $25.50 a share on a 41% increase in sales to $9.6 billion.
More income on the horizon
Five Leaderboard stocks will announce earnings this week. After Devon Energy and Diamondback Energy, Occidental Petroleum (OXY) will publish results for the second quarter on Tuesday. Thursday morning, EOG Resources (EOG) releases income.
Marathon Petroleum (MPC) and Pioneer Natural Resources (PXD) also reports on Tuesday. Marathon oil (MRO), SM Energy (SM) and WHAT (APA) will report Q2 earnings on Wednesday after the market closes.
Shares that produce shale oil were mostly down ahead of earnings on Monday. US crude oil prices also extended losses, settling 4.6% to $94 a barrel. US natural gas futures followed the trend, losing 4% on Monday before paring losses. The price of gas at the pump on Monday averaged $4.21, according to AAA data.
US shale producers are expected to report strong profits in the second quarter, with Bloomberg forecasting 28 major companies will earn more than $100 billion in free cash flow in 2022.
Flat production, increasing capital expenditure
But while many oil and gas producers see strong profits in 2022, inflation and supply chain issues have resulted in increased investment spending, even as many of them keep production flat.
The US Energy Information Administration shows that oil and gas companies have shifted both expenses and production down for the second quarter.
An EIA scan of 53 public U.S. oil and gas companies, which together account for about 34% of domestic production, showed that aggregate cash flows rose 86% to $25.7 billion during the first quarter. Meanwhile, capex almost doubled compared to 2021. The same companies reported a 5% drop in capex in the second quarter compared to Q1 this year. Crude oil production has increased by 10% compared to Q1, but is still flat compared to Q4 2021.
The EIA found that while the price of crude oil has increased, supply chain issues and production costs continue to weigh on the energy sector. The costs of supplies and labor for oil production have more than doubled from the pre-pandemic average, according to the EIA.
Oilfield service companies Schlumberger (SLB) and Halliburton (HAL) both reported investment increases in the 2nd quarter.
OPEC+ meets this week
Amid earnings this week, the Organization of the Petroleum Exporting Countries along with their allies (including Russia), known as OPEC+, will meet on Wednesday. The oil cartel will discuss production quotas for September. The rally comes as the White House has called for a supply increase in an effort to stabilize the oil market.
The price of crude oil has angled sharply in 2022, reaching $130 a barrel in February, after Russia invaded Ukraine. Recently, inflation and fears of a demand-suppressing recession have pushed prices down somewhat. In early June, OPEC+ decided to increase production by 648,000 barrels per day for July and August, up from the previous quota of 432,000 barrels per day.
Shale oil producer stocks: Occidental Petroleum
Estimates: Analysts forecast earnings of $3.03 per share versus 32 cents in the quarter last year. Revenue is expected to be $9.8 billion, an increase of 64%.
Results: Occidental Petroleum publishes results for the 2nd quarter on Tuesday after the market closes.
Shares pared losses to end Monday down 0.8%, trading at 65.22. Occidental moved well above its 50-day moving average on Friday, helped by strong earnings reports from Exxon Mobil and Chevron. OXY has generally outperformed many other energy stocks as it battles for support at its 50-day line.
In July, Warren Buffett’s Berkshire Hathaway (BRKA) bought an additional 12 million shares of OXY stock, bringing its stake to nearly 20%. Like many other oil and gas producers, Occidental has shown booming earnings growth in recent quarters.
In the first quarter, revenue rose 56% to just over $8.5 billion, down slightly from triple-digit year-over-year growth in the previous three quarters. Broken down by segment, oil and gas revenues rose by 66% to just over 6 billion dollars. Chemicals revenue increased 55% to $1.68 billion.
Houston-based Occidental ranks first in the oil and gas exploration and production industry group. OXY stock has a composite rating of 99. Its relative strength rating is a best possible 99. The EPS rating is 77.
Marathon Petroleum Earnings
Estimates: Analysts forecast second-quarter EPS 0f $8.92 vs. 67 cents in the same quarter last year, and $40.3 billion in sales, a jump of 35%.
Earnings: The announcement is expected on Tuesday morning.
Marathon Petroleum shares fell 1.37% to 90.4 on Monday. The stock has moved above its 200-day moving average, but is facing resistance at its 50-day line. MPC is in the midst of consolidation with a buy point at 114.45.
Ohio-based MPC focuses primarily on downstream production and operates the largest refining system in the United States. The company is also the majority owner in MPLX (MPLX), which is a midstream company involved in the production of natural gas and crude oil.
Marathon Petroleum ranks eighth in the industry group oil and gas refining, marketing and transport. MPC has a 93 Composite Rating. Its relative strength rating is 96 and EPS rating is 77.
Shale Oil Producer Stocks: Pioneer Natural Resources
Estimates: Wall Street expects earnings per share of $8.82, up 246% year over year, while sales more than doubled to $7 billion.
Earnings: Check Tuesday afternoon.
Shares fell 3.7% to 228.17 on Monday. PXD stock is currently about 18% below a buy point of 288.56. The shares are in the middle of a second phase of consolidation.
Pioneer Natural Resources ranks 10th in the Oil & Gas-US-Exploration and Production industry group. PXD has a 99 Composite Rating. Its relative strength rating is 95 and it has a 99 EPS rating.
PXD is one of the top five U.S. oil producers and the leading oil producer for 2021 in the Permian Basin production area, according to the Railroad Commission of Texas.
Profit growth increased in the 1st quarter. Earnings increased by 337%, compared to 328% in the previous report. Analysts expect revenue growth of 150% for the full year.
While the EIA estimates that U.S. crude oil production will average close to 11.9 million barrels per day for all of 2022, an average increase of 700,000 barrels per day compared to 2021, Pioneer CEO Scott Sheffield warned investors in May that they should expect a lot less production.
“The growth profile that the EIA has, and some of the other think tank firms, I think it’s too aggressive over the next two years for U.S. oil production,” Sheffield said during the first-quarter earnings call.
Sheffield estimates that this year’s total oil production in the US will increase in the range of 500,000 barrels per day to 600,000 barrels per day.
At the time, PXD also expected its own oil production to increase by no more than 5% this year.
Follow Kit Norton on Twitter @KitNorton for more coverage.
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